Hiring the Private Eyes

Insurance fraud has not changed over the past few decades, but the sophistication of the crime has. Fraudsters have become bolder and more demanding of the insurance industry, bordering on the edge of arrogance. Fraudsters seem to think it is there given right to defraud insurance companies, which in turn defrauds all of us who pay insurance premiums.  I believe it is our duty to combat these fraudsters and bring them back to reality.

I have been involved with criminal investigations and fraudulent insurance claim investigations for 24 years with the RCMP and 18 years with the Insurance Bureau of Canada. Most recently, I joined CKR Global in Calgary, Alberta as a private investigator specializing in insurance claims. Drawing on my experience, I would like to illustrate the increasing sophistication of insurance fraud. I am going to discuss two such cases that were both investigated mainly in Alberta.

Both of these cases demonstrate the value of private investigation when dedicated special fraud investigation units face resource constraints.

Project Sarge

The first case takes us back 10 years, when I first became involved with accident benefit and bodily injury claims. I was working auto theft at the time but was seconded to this investigation, to which I refer as Project Sarge. It involved numerous segments of a fraud ring, including interpreters, clinics, doctors and lawyers.

The first process was to gather information from the insurance companies. This amounted to communicating with 25 companies regarding 550 separate claims involving thousands of claimants. At the outset, it became abundantly clear that this investigation would become a massive undertaking. In the beginning, I was working the file alone, so I had to prioritize. I targeted a certain group that clearly used many of the same doctors and lawyers involved in these claims. Once the targets were known, a new database helped trace relationships between them; this database produced charts of the various relationships, assisting with the investigation. From this database, we learned that 70% of all claimants attended the same doctor and 67% the same lawyer.

We used this information to commence an undercover operation with the RCMP. This operation involved setting up a “paper accident” so the trail would be real. Insurance documents for the undercover operator (to whom I will refer as ‘U.C.’) assisted when U.C. attended at the interpreter’s office. Within 10 minutes of meeting the interpreter, U.C. was taken to a law firm, where he was introduced to ‘Mr. Lawyer.’ Mr. Lawyer advised he could get significant amounts of money for U.C. and the process commenced.

U.C. was then recommended to a Calgary doctor, who was also a target in our investigation. Prior to U.C. attending the doctor’s office, ABC news aired a documentary about staged accidents in Los Angeles and how “runners” would then take the persons involved in the accidents to law firms.  The targets of the Calgary investigation became fearful; they decided to cease operations for a period of time. The interpreter told U.C. that the documentary was a reason for shutting down.

In the interim, the doctor involved closed his practice and left the country for six months. Mr. Lawyer became involved in other illegal activities – using trust funds for illegal purposes, for example – and became the subject of a Law Society of Alberta investigation. The province’s legal regulator ultimately closed the lawyer’s practice down and barred him for life from practicing law in Alberta. I did see a document from the doctor’s office indicating the lawyer owed the doctor one month of referral fees, amounting to $38,000. This was for one month: one can only imagine how much money was involved in total.

After the doctor returned from abroad, U.C. was sent to the doctor’s office as a patient. U.C. was wired and initiated a conversation with the doctor. He said the interpreter had referred him and asked the doctor how he might benefit from the car accident. The doctor immediately asked U.C. to leave, saying the interpreter did not know what he was talking about. The undercover agent only used the interpreter’s first name, and yet the doctor did not even ask U.C. about whom he was talking. The doctor just immediately asked U.C. to leave.

This 3-1/2 year investigation ended up with the disbarment of a lawyer, the sixth-month closure of a doctor’s practice, the closure of two rehab clinics and the release of one interpreter. No criminal charges were ever laid, yet the savings to the insurance companies were phenomenal.  At the beginning of Project Sarge, 25 insurance companies were asked to fund the cost of this operation to the tune of $3,000 each. Only 11 companies participated in the funding At the end of the operation, they all received their money back.

Project Nine

Within the past five years, Project Nine was established to investigate the activities of a physiotherapist (PT) in the City of Calgary. The PT was suspected of upgrading her minor injury patients from WAD I and WAD II to WAD III. A WAD I injury calls for 11 treatments and a settlement of under $4,000, which is the cap on minor injuries in Alberta. WAD II allows for 21 treatments and a settlement also under the cap of $4,000. A WAD III injury, on the other hand, allows for unlimited treatments for recovery and opens the chequebooks for lawsuits. In this case, the majority (99%) of the patients were being sent to the same lawyer for litigation against the insurance companies. The lawyer was also found to be sending his clients to the PT for re-assessment to WAD III.

Once again, I was looking at a lengthy investigation. The insurance information was gathered over a period of one year. It involved seven insurance companies and the file count was capped at 75 files. The first investigation taught me big is not necessarily better or most efficient. If we could show a pattern from these 75 files, then that is all I would need.

None of the patients/claimants would speak to me when interviews were requested. Nevertheless, I still had to go through that process. We approached Calgary police, but they advised us that they would not investigate the matter since they felt it was a matter of professional interpretation regarding the upgrading of the injuries. The insurance industry – and in particular, the accident benefit and bodily injury adjusters – were becoming increasingly frustrated and concerned about the pattern of behaviour they thought the physiotherapist was exhibiting.

Finally, I approached the College of Physical Therapists in Alberta. I felt that if no other investigative agency could help me, then perhaps the regulatory body for physiotherapists in Alberta would be interested. I received a warm, but cautious welcome. One year later, the college decided to initiate an investigation.

To comply with the college’s internal procedure, the investigator assumed the role of the complainant representing the insurance companies. At the time, this was a groundbreaking decision since, as a rule, the college required a complaint from the patient or a claimant prior to entering into an investigation. I was able to show this would not happen, since the patients and clients in this scenario were suing for hundreds of thousands of dollars.

The college hired two investigators. I shared my file information with them so they could conduct their inquiry. This took place over several months. After that, the college took over the investigation. Over the next two years, the college faced lawyers representing the physiotherapist in her bid to defend herself against the college’s efforts. Finally, a hearing was scheduled to take place close to three years after commencing this process.

A decision has been made with a favorable result. A suspension has been imposed with financial paybacks. However, the decision is currently under appeal, with the appeal hearing scheduled in November 2011. Out of re
spect for the appeal process, I have refrained from identifying the physiotherapist or clinic.

I learned many years ago as an RCMP officer that it is my job to get the person to court (or in this case, to a hearing). After that, the final decision is out of my hands. Seeing this case through to its conclusion has proven to be very fulfilling, even though at the beginning it was looking to be very challenging with several obstacles in my way.

Conclusion

Since these experiences, I have learned that the Insurance Bureau of Canada (IBC) does not have an AB/BI Rings Unit in  Alberta. I believe the private sector can fill in the gap by designating a similar anti-fraud unit as an “investigative body,” which covers PI firms. To my knowledge, nothing can stop a private investigator from approaching the police, regulatory bodies or any other governing body to peruse fraudulent insurance claims. The Privacy Act in Alberta (PIPA) certainly covers this for investigation purposes, either for criminal or civil proceedings.